The answer to this question begins with the ‘E’ in ESG. The simple truth is that decarbonization and the measured environmental impact of all industries must matter. Homebuilding will be no different. Decarbonization is being elevated as an essential and prioritized value in homebuilding, with the industry itself being asked to develop effective and efficient ways to successfully define, integrate, and measure these qualities within the day-to-day business of building America’s homes.
The actual nomenclature or term ESG (Environmental, Social and Governance) has become something of a pariah due to it emerging as an intensely political issue. This has been caused (in part) by the major global investment firms’ pragmatic – yet highly politicized – crusade to drive the principles of ESG investing into the thinking of American companies, investors, and the public.
However, when you revert to the origins of where this all started, it all made beautiful sense. It was an idea that was the centerpiece of the 2004 United Nations Report, ‘Who Cares Wins’. This was a thesis presented by a group of the world’s major financial institutions proposing some profoundly simple stuff – like the notion that how much a company cares about the impact it has on its planet, its people, and its community, should deeply matter. So much so, that it should be directly tied to both the reality and perception of that company’s market value.
A publicly traded homebuilding company’s board responsibility to its shareholders and the value of the company should no longer be simply measured or incentivized relative to just current and future revenue and profit growth. Now a sense of broader responsibility is being brought to the table as part of the company value equation. Presenting new aspects in the measurement of “success” in the task of increasing shareholder value and catalyzing the development of homebuilding organizations that will become better equipped to authentically serve the new housing needs of generations to come.
Despite the current ESG political malaise, when you step back and consider the fundamental wisdom that these ideas represent – and the inevitably of these principles becoming a privately and publicly mandated part of American business life – then as a major homebuilder, there’s really no choice other than to show up and be a proactive participant in the ongoing creation of this new game and rules. The homebuilding industry is being held to a higher standard. Seeing this through the shared lenses of business sensibility, situational inevitability, and of course, corporate, and personal conscience - it’s not difficult to grasp just how much this really does matter.